(a) A custodial trust terminates on the custodial trustee's receipt of a signed written direction of the beneficiary, if not incapacitated within section 554B-10, or of the beneficiary's conservator, if any, or upon the beneficiary's death. Upon termination, the custodial trustee shall transfer the unexpended custodial trust property:
(1) To the beneficiary, if not incapacitated;
(2) To the conservator or other court-designated recipient for an incapacitated beneficiary; or
(3) Upon the beneficiary's death, in the following order:
(A) As last directed in a writing signed by the deceased beneficiary who was at the time not incapacitated and received by the custodial trustee during the life of the deceased beneficiary;
(B) To the survivor of multiple beneficiaries when survivorship is provided pursuant to section 554B-6;
(C) As designated in the custodial trust instrument; or
(D) To the estate of the deceased beneficiary.
(b) If, when the custodial trust would otherwise terminate, the distributee is incapacitated, the custodial trust continues for the benefit of the distributee as beneficiary until the incapacity is removed or the custodial trust is terminated by the distributee's conservator.
(c) The death of a beneficiary does not terminate the power of the custodial trustee to discharge obligations of the custodial trustee or beneficiary incurred before the termination of the custodial trust.